80 FR 39463 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Expand FINRA's Alternative Trading System (“ATS”) Transparency Initiative To Publish OTC Equity Volume Executed Outside ATSs
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 131 (July 9, 2015)
Federal Register Volume 80, Issue 131 (July 9, 2015)
| Page Range | 39463-39468 | |
| FR Document | 2015-16729 |
[Federal Register Volume 80, Number 131 (Thursday, July 9, 2015)] [Notices] [Pages 39463-39468] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-16729] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75356; File No. SR-FINRA-2015-020] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Expand FINRA's Alternative Trading System (``ATS'') Transparency Initiative To Publish OTC Equity Volume Executed Outside ATSs July 2, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on June 23, 2015, Financial Industry Regulatory Authority, Inc. (``FINRA'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to expand FINRA's alternative trading system (``ATS'') transparency initiative to publish the remaining equity volume executed over-the-counter (``OTC'') by FINRA members, including, among other trading activity, non-ATS electronic trading systems and internalized trades. The text of the proposed rule change is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. [[Page 39464]] A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Under FINRA rules, each member that operates an ATS is required to report its weekly volume, by security, to FINRA and also must use a unique market participant identifier (``MPID'') for reporting order and trade information to FINRA. As part of these requirements, FINRA makes the reported volume and trade count information for equity securities publicly available on its Web site.\3\ Pursuant to the proposed rule change, FINRA is proposing to amend Rules 6110 and 6610 to expand this transparency initiative by publishing the remaining OTC equity (or ``non-ATS'') volume by member firm and security. --------------------------------------------------------------------------- \3\ FINRA currently does not publish ATS volume information regarding fixed income securities. --------------------------------------------------------------------------- FINRA is proposing to derive a firm's non-ATS volume information directly from OTC trades reported to FINRA's equity trade reporting facilities.\4\ As such, members would not have any new or additional reporting requirements as a result of the proposed rule change. FINRA would base a firm's non-ATS volume on trades reported for dissemination purposes (or ``tape reports'') on which the firm is identified as the member with the trade reporting obligation.\5\ A firm's published trading volume information would not include trades for which the firm is the reported contra party,\6\ nor would it include trades that are reported for regulatory or clearing purposes only (or ``non-tape reports''). --------------------------------------------------------------------------- \4\ FINRA's equity trade reporting facilities (collectively referred to herein as the ``FINRA Facilities'') are the Alternative Display Facility (``ADF'') and the Trade Reporting Facilities (``TRF''), to which members report OTC transactions in NMS stocks, as defined in SEC Rule 600(b) of Regulation NMS; and the OTC Reporting Facility (``ORF''), to which members report transactions in ``OTC Equity Securities,'' as defined in FINRA Rule 6420 (i.e., non-NMS stocks such as OTC Bulletin Board and OTC Market securities), as well as transactions in Restricted Equity Securities, as defined in FINRA Rule 6420, effected pursuant to Securities Act Rule 144A. \5\ Under FINRA rules, in a trade between a member and non- member or customer, the member has the obligation to report the trade, and in a trade between two members, the ``executing party,'' defined as the member that receives an order for handling or execution or is presented an order against its quote, does not subsequently re-route the order, and executes the transaction, has the obligation to report the trade. See Rules 6282(b), 6380A(b), 6380B(b) and 6622(b). \6\ FINRA is proposing to include only volume from the executing party perspective because otherwise, published OTC volume would be overstated (i.e., publishing volume from both the executing party and contra party perspectives would double count that executed volume). --------------------------------------------------------------------------- FINRA is proposing to publish on the FINRA Web site weekly volume information (number of trades and shares) by firm and security, with limited de minimis exceptions noted below, on a two-week or four-week delayed basis in accordance with the time frames specified for ATS volume publication.\7\ Specifically, volume information would be published on a two-week delayed basis for NMS stocks in Tier 1 under the NMS Plan to Address Extraordinary Market Volatility (also referred to as the ``Limit Up/Limit Down Plan'') \8\ and a four-week delayed basis for all other NMS stocks and OTC Equity Securities.\9\ --------------------------------------------------------------------------- \7\ See Rule 4552. \8\ Tier 1 NMS stocks include those NMS stocks in the S&P 500 Index or the Russell 1000 Index and certain ETPs. See NMS Plan to Address Extraordinary Market Volatility. FINRA will make changes to the Tier 1 NMS stocks in accordance with the Indices. Changes to the S&P 500 are made on an as needed basis and are not subject to an annual or semi-annual reconstitution. S&P typically does not add new issues until they have been seasoned for six to twelve months. Russell 1000 rebalancing typically takes place in June. \9\ FINRA notes that non-ATS volume data will be displayed in the same format in which ATS volume data is displayed today, i.e., aggregate volume for each firm across all NMS stocks (Tier 1 and all other NMS stocks) and OTC equity securities; aggregate volume for each security across all firms; and volume for each security by each firm (except with respect to the de minimis volume discussed below). --------------------------------------------------------------------------- Based on feedback FINRA has received from firms, FINRA is also proposing to publish aggregate volume totals across all NMS stocks and aggregate volume totals across all OTC Equity Securities for each calendar month. FINRA proposes to publish monthly aggregate totals on a one month delayed basis, e.g., totals for the month of April would be published on or around June 1. FINRA is proposing to publish non-ATS volume information at the firm level and not on an MPID-by-MPID basis. FINRA believes that this is appropriate because outside of the ATS context, not all firms have a separate MPID for each unique trading center at the firm, and as such, publishing volume information at the MPID level may not provide meaningful or consistent information to the marketplace. For members that use more than one MPID for their non-ATS trading,\10\ FINRA proposes to aggregate and publish the non-ATS trading volume for all non-ATS MPIDs belonging to the firm under a single ``parent'' identifier or firm name.\11\ FINRA notes that a firm's ATS volume will continue to be published separately under the unique MPID(s) for each ATS operated by the firm. --------------------------------------------------------------------------- \10\ For example, a firm may use separate MPIDs for its proprietary and agency desks. \11\ FINRA is able to identify all MPIDs belonging to a given firm based on currently available information, and as such, members will not have a new reporting obligation as a result of this proposal. --------------------------------------------------------------------------- FINRA does not believe that publishing volume information for each firm that executed only a small number of trades or shares in any given period would provide meaningful information to the marketplace. Accordingly, as described in more detail below, FINRA is proposing to combine volume from all members that do not meet a specified minimum threshold and publish such ``de minimis'' volume information for those members on an aggregated basis. For example, if five firms each execute 10 trades in the reporting period in a security, their 50 trades would be aggregated and published as a single line item; the firms and their volume information would not be identified separately. For a firm with more than one non-ATS MPID, the total volume across all of its non-ATS MPIDs would be combined for purposes of determining whether the de minimis threshold has been met. FINRA is proposing to establish a de minimis threshold of fewer than on average 200 non-ATS transactions per day executed by the firm across all securities or in a specific security during the one-week reporting period. This proposed threshold is based on the level of trading activity used by the SEC to identify ``small market makers'' for purposes of exemptive relief from the rule requiring market centers that trade NMS securities to make publicly available electronic reports that include uniform statistical measures of execution quality (SEC Rule 605 of Regulation NMS).\12\ In developing its proposal, FINRA reviewed volume statistics for firms across all securities for a one- week period (June 23-29, 2014). This review indicated that without applying any threshold, approximately 300 individual firms would have volume attributed by name. Looking at market participants with on average 200 or more trades per day across all securities, approximately 62 firms would have volume attributed by [[Page 39465]] name and would account for 98.99 percent of all trading volume. --------------------------------------------------------------------------- \12\ Specifically, the SEC exempted any market center that reported fewer than 200 transactions per trading day on average over the preceding six-month period in securities that are covered by the rule. See letter from Annette L. Nazareth, Director, Division, to Richard Romano, Chair, and Carl P. Sherr, Co-Chair, NASD Small Firms Advisory Board, dated June 22, 2001. --------------------------------------------------------------------------- Thus, if a firm averages fewer than 200 non-ATS transactions per day across all securities during the reporting period, FINRA would aggregate the firm's volume with that of similarly situated firms. Additionally, because the published volume data would be broken down by security, if a firm averages fewer than 200 non-ATS transactions per day in a given security during the reporting period, FINRA would aggregate the firm's volume in that security with that of similarly situated firms, even if the firm averages more than 200 non-ATS transactions per day across all securities during the reporting period. FINRA notes that all of the OTC volume would be published, but for members that meet the de minimis threshold, their volume would not be attributed by name. The proposed rule change will provide additional transparency into a significant portion of the OTC market.\13\ Accordingly, FINRA believes that the proposed rule change will enable the public to better understand a firm's equity trading activity off exchanges by reviewing the proposed non-ATS volume together with the current ATS volume reports. In this regard, FINRA notes that during the rulemaking process on the ATS transparency initiative, some commenters recommended broadening the proposal to include trade information for other OTC execution venues. --------------------------------------------------------------------------- \13\ For example, for the period from March 16 through April 10, 2015, approximately 59 percent of the share volume of OTC trades in NMS stocks was executed outside an ATS. --------------------------------------------------------------------------- FINRA considered whether dividing published volume information into more granular categories, such as by trading capacity (i.e., principal versus agency or riskless principal) or by participant type (e.g., market maker), would be feasible or provide additional meaningful or reliable information to market participants. Segregating the data, e.g., by trading desk, would entail potentially significant development work by firms to sufficiently identify the activity for FINRA (e.g., volume attributable to a market making desk) and may not be consistent across firms, while also leading to some concerns about information leakage. Thus, FINRA is not proposing at this time to publish the non- ATS volume data at more granular levels than by firm and security. In developing its approach, FINRA staff solicited industry input prior to presenting the proposal to FINRA's Board of Governors in September 2014. In addition to discussing the proposal with a number of FINRA's industry advisory committees, FINRA staff also informally consulted a number of firms, including large and mid-size firms with a variety of business models, as well as two buy-side firms. The committees and all but one of the consulted firms were generally supportive of the proposal. Some of the consulted firms noted that the published volume information would provide market participants with a better sense of flow in a given market segment and would most likely be used for purposes of market share or other longer-term quantitative market analysis. However, because publication of the data necessarily would be delayed, the consulted firms believe that it would likely not be a valuable tool for such purposes as analyzing execution quality or making day-to-day order routing and trading decisions. Several of the consulted firms and committee members expressed some concern about the potential for information leakage. The consulted firms agreed on the importance of delaying publication of non-ATS volume information, noting that the closer to real-time the information is published, the greater the risks that would result from disclosing a market participant's trading activity. One of the consulted firms was concerned about publication of non-ATS volume information at the market participant and security level, even on a delayed basis, asserting that other market participants would be able to download data associated with the firm's trading activity, re-engineer it to discern patterns of historical trading and identify similar patterns in future trading that could be used to their advantage (and to the firm's disadvantage). Even the firms that were generally supportive of the proposal to publish non-ATS volume information indicated that they would have concerns if the information were published at a more granular level.\14\ --------------------------------------------------------------------------- \14\ For example, with respect to publishing data according to trading capacity, several of the consulted firms expressed concern that a market participant's large position holdings could be discerned from the data (e.g., accumulations of proprietary positions in advance of ETF creations or secondary offerings). Similarly, the consulted firms did not believe that there would be value in getting more granular information, e.g., according to desk or department, noting that since the data would be historical and not real-time, it would not change behavior in terms of accessing liquidity. One firm commented that more granular information would not be reliable or consistent across firms, because not every firm has the same business model or desk structure. In addition, several of the firms indicated that they would be less supportive of a proposal that requires them to comply with a new reporting regime or undertake development work to be able to identify, e.g., volume attributable to a market making desk. --------------------------------------------------------------------------- FINRA believes it has taken appropriate steps to address firms' concerns by delaying publication and limiting the granularity of the published information to firm and security. The proposed rule change is similar to the approach currently taken with respect to ATS volume information, and firms have not come to FINRA with any complaints regarding information leakage since FINRA began publishing ATS volume information. However, following implementation of the proposed rule change, FINRA will consider whether modifications are appropriate, e.g., to the scope of published information or the delay between trading activity and publication, based on feedback it may receive from interested parties, including firms and users of the data. One of the consulted firms also indicated that FINRA should not charge for the data, noting that the potential value is diminished if it is another cost center for the industry. FINRA notes that it has determined not to charge a fee for the data that would be published pursuant to the proposed rule change and will make non-ATS OTC volume information available to the public for free in a downloadable format. In addition to the oral feedback discussed above, FINRA solicited written comments on the proposal in Regulatory Notice 14-48 (November 2014), which are summarized below. FINRA proposes that the effective date of the proposed rule change will be no later than 180 days after Commission approval. Thus, FINRA anticipates that it will begin publication of data in accordance with the proposed rule change in the fourth quarter of 2015 or first quarter of 2016 and will announce the specific date in a Regulatory Notice. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,\15\ which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the proposed rule change will provide additional transparency into a significant portion of the OTC market and that the increased transparency will enable market participants and investors to better understand a firm's trading [[Page 39466]] volume and market share in the equity market. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78o-3(b)(6). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA has undertaken an economic impact assessment, as set forth below, to analyze the regulatory need for the proposed rule change, its potential economic impacts, including anticipated costs and benefits, and the alternatives FINRA considered in assessing how to best meet its regulatory objectives. Regulatory Need FINRA's current rules require each member that operates an ATS to report its weekly trade volume information to FINRA. As part of these requirements, FINRA makes the information for equity securities available to the public, thereby providing market participants and investors useful information about trading activity in the ATS segment of the OTC equity market. The proposed rule change will expand this transparency initiative by publishing the remaining OTC equity volume reported to FINRA. The increased transparency will enable the market to better understand a firm's trading volume, its market share in the equity market and the amount of OTC trading in each equity security. Anticipated Benefits The proposed rule change would expand the benefits of FINRA's ATS transparency initiative by providing additional transparency to the remaining equity volume executed in the non-ATS segment of the OTC equity market. The trading activity in this non-ATS segment represents a significant portion of the overall equity trading in the OTC market.\16\ The increased transparency would enable market participants and investors to better understand the overall equity trading in the OTC market as well as the amount of OTC trading in individual equity securities. Furthermore, the expansion of transparency would help the marketplace better understand a firm's overall OTC trading of equities, thereby enhancing their understanding of executing firms' trading volume and market shares in the equity market. --------------------------------------------------------------------------- \16\ See, e.g., Laura Tuttle, ``OTC Trading: Description of Non- ATS OTC Trading in National Market System Stocks'' (March 2014). Tuttle reports that the non-ATS segment of the OTC market in NMS stocks is larger than the ATS segment. --------------------------------------------------------------------------- Anticipated Costs The proposed rule change would not impose any additional reporting requirements on firms since FINRA will directly derive the non-ATS volume data from OTC trades reported to FINRA's equity trade reporting facilities. As a result, the proposed rule would have minimal impact on firms from a systems development and reporting perspective. Other Economic Impacts In developing this proposal, FINRA considered whether a firm's trading strategy could be discerned from the published data. FINRA believes that the proposed rule change mitigates such information leakage concerns by delaying the publication of trading volumes and by limiting the granularity of the published information. The proposed rule change is a well-calibrated effort to reduce information leakage concerns and to provide market participants access to meaningful information on non-ATS trading activity. FINRA believes that the proposed rule change will not impose differential risks of information leakage on firms. Moreover, by expanding transparency to all OTC equity trading by FINRA members, the proposed rule change would bridge gaps in information published across ATS versus non-ATS segments of the OTC equity market, thereby reducing any competitive distortions that may be associated with such information gaps. Alternatives In considering how to best meet its regulatory objectives, FINRA considered several alternatives to particular features of this proposed rule change. For example, FINRA considered whether publishing volume information at a more granular level (e.g. by trading capacity or by participant type) would provide additional useful information to market participants, and the costs associated with such an alternative. FINRA believes that segregating the data, e.g., by trading desk, would entail significant development work by firms, without commensurate benefit to market participants. In addition, as discussed in more detail above, several commenters raised concerns about information leakage with publishing more granular data. Accordingly, FINRA has determined not to publish data at a more granular level than by firm and security. FINRA also considered publishing non-ATS volume information at the MPID level, as opposed to the firm level. FINRA believes that publishing information at the firm level is more appropriate because not all firms have a separate MPID for each unique trading center at the firm. Accordingly, publishing volume information at the firm level would likely provide more consistent information to the marketplace. In developing this proposal, FINRA also considered alternative approaches related to publishing volume information for firms with minimal non-ATS trading activity. As discussed in more detail above, FINRA does not believe that publishing volume information separately for each firm with minimal trading would provide meaningful information to the marketplace. Accordingly, FINRA is proposing to combine volume from all members with trading activity below a de minimis threshold of on average 200 transactions per day. FINRA considered several alternative de minimis thresholds and solicited comment on these alternatives in Regulatory Notice 14-48. FINRA believes that the proposed de minimis threshold is reasonable as it would account for the vast majority \17\ of the total non-ATS trading volume and is also consistent with the level of trading activity used by the SEC to identify ``small market makers'' for SEC Rule 605 of Regulation NMS. --------------------------------------------------------------------------- \17\ As discussed above, based on its review of recent trading volume statistics, FINRA estimates that the proposed de minimis threshold would account for approximately 99% of the overall non-ATS trading volume, and as a result the vast majority of the trading volume would be attributed by firm name under the proposed rule change. --------------------------------------------------------------------------- C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The proposed rule change was published for comment in Regulatory Notice 14-48 (November 2014). Three comments were received in response to the Regulatory Notice.\18\ A copy of the Regulatory Notice is attached as Exhibit 2a.\19\ Copies of the comment letters [[Page 39467]] received in response to the Regulatory Notice are attached as Exhibit 2c. The comments are summarized below. --------------------------------------------------------------------------- \18\ See Letter from St[eacute]phane Ty[ccaron], Co-founder, Quincy Data, LLC to Marcia E. Asquith, Corporate Secretary, FINRA, dated January 9, 2015 (``QD Letter''); letter from John Ramsay, Chief Market Policy and Regulatory Officer, IEX Services LLC to Marcia E. Asquith, Corporate Secretary, FINRA, dated February 12, 2015 (``IEX Letter''); and letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Marcia E. Asquith, Corporate Secretary, FINRA, dated February 20, 2015 (``SIFMA Letter''). \19\ The Commission notes that the Exhibits referred to herein, as well as the comment letters cited in the footnotes, are attached to the filing itself and not to this Notice. --------------------------------------------------------------------------- All three commenters generally supported the proposal. One commenter specifically noted that the data can be used by market participants, regulators and academics to better understand and track trends in OTC trading generally, and can also help investors better evaluate the routing and execution practices of individual firms.\20\ This commenter agreed with the proposal to publish non-ATS volume information at the firm (rather than MPID) level, while another commenter disagreed with this aspect of the proposal, stating that the trade publication should identify the matching engine with a unique identifier.\21\ FINRA agrees that publication at the MPID level makes sense in the context of ATS executions; however, as noted above, outside of the ATS context, not all firms have a separate MPID for each unique trading center at the firm, and as such, publishing volume information at the MPID level may not provide meaningful or consistent information to the marketplace. --------------------------------------------------------------------------- \20\ See IEX Letter. \21\ See QD Letter. --------------------------------------------------------------------------- One commenter agreed with the proposal to aggregate volume information for firms with a de minimis amount of OTC volume, noting that it is a reasonable way to assure that the published information will be meaningful and free of the ``noise'' that could otherwise arise from a broader publication measure.\22\ On the other hand, another commenter disagreed with the proposal to aggregate data for firms with a de minimis amount of trading, noting that they believe in simple rules with no exceptions.\23\ However, this commenter did not discuss the potential value of publishing unaggregated volume information for firms with only a small number of trades. As discussed above, FINRA does not believe that publishing volume information below the proposed de minimis threshold would provide meaningful information to the marketplace. --------------------------------------------------------------------------- \22\ See IEX Letter. \23\ See QD Letter. --------------------------------------------------------------------------- One commenter suggested using an alternate notional volume measure as part of the de minimis threshold so that firms doing relatively few trades but in large notional volume are included.\24\ FINRA believes that the potential costs and additional resources, including technology infrastructure, that would be required to implement a second de minimis threshold measure would outweigh any potential benefit. In addition, FINRA is concerned that utilizing two different threshold measures may be confusing to consumers of the data, and believes that a single threshold measure, based on number of trades, would be the simplest and easiest to understand. However, as noted above, following implementation of the proposed rule change, FINRA will consider whether modifications are appropriate, including whether changes to the de minimis threshold would be appropriate, based on feedback it may receive from interested parties. --------------------------------------------------------------------------- \24\ See IEX Letter. --------------------------------------------------------------------------- Another commenter expressed concern that the proposed two-week publication timeframe for Tier 1 NMS stocks may result in unintended information leakage, and in particular disclosure of large institutional trades, which could enable reverse engineering of those trades if published within two weeks of execution.\25\ To address the information leakage concerns, this commenter recommended aggregation on a monthly, not weekly basis, and publishing on a four-week delayed basis. Another commenter stated that a delay of one month is sufficient to enable broker-dealers to manage their risk, but also recommended that FINRA consider the shortest publication time that provides enough time to manage the risk of a position, which could differ by security class (e.g., two weeks for liquid equities and six months for illiquid bonds).\26\ This commenter further noted that it supports the publication of complete and fully granular data, without specifying the level of granularity or how to mitigate the attendant risk of information leakage.\27\ --------------------------------------------------------------------------- \25\ See SIFMA Letter. \26\ See QD Letter. FINRA notes that the proposed rule change applies only to OTC equity volume; information for fixed income securities would not be published as part of this proposal. \27\ See QD Letter. --------------------------------------------------------------------------- As discussed above, FINRA considered the potential for information leakage in developing its proposal and believes that it has taken adequate steps to mitigate that potential by, among other things, proposing to publish non-ATS volume information on the same delayed basis that is used for ATS volume data, as well as at the firm, rather than MPID, level and not further segregating volume information by trading capacity or trading desk. One commenter opposes FINRA charging for non-ATS volume information.\28\ As noted above, FINRA has determined not to charge for the non-ATS volume information that would be published pursuant to the proposed rule change. --------------------------------------------------------------------------- \28\ See SIFMA Letter. --------------------------------------------------------------------------- Finally, several comments submitted on Regulatory Notice 14-48 are not germane to the proposal. One commenter urged FINRA to eliminate the current requirement for ATSs to report volume information to FINRA.\29\ FINRA notes that elimination of the ATS volume reporting requirement will be addressed in a separate proposed rule change by FINRA. Another commenter proposed an alternative to the consolidated audit trail,\30\ which is not germane to the proposed rule change and does not warrant a specific response. --------------------------------------------------------------------------- \29\ See SIFMA Letter. \30\ See QD Letter. --------------------------------------------------------------------------- III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-FINRA-2015-020 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-FINRA-2015-020. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will [[Page 39468]] post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-FINRA-2015-020 and should be submitted on or before July 30, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\31\ --------------------------------------------------------------------------- \31\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-16729 Filed 7-8-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 131 / Thursday, July 9, 2015 / Notices 39463
a fragmented market.’’ 15 Another mechanism of a free and open market SECURITIES AND EXCHANGE
commenter stated that the market and a national market system, and, in COMMISSION
quality of less liquid securities could be general, to protect investors and the
improved if their exchange trading public interest. [Release No. 34–75356; File No. SR–FINRA–
presence was concentrated on the listing 2015–020]
The Commission believes that the
exchange.16 Both commenters expressed
proposals will provide transparency by
support for similar initiatives by other Self-Regulatory Organizations;
exchanges, with one commenter signaling each Exchange’s general
intention to voluntarily refrain from Financial Industry Regulatory
encouraging other exchanges to consider Authority, Inc.; Notice of Filing of a
expanding the scope of less liquid trading any security that does not meet
the consolidated average daily trading Proposed Rule Change To Expand
securities that would be subject to a FINRA’s Alternative Trading System
concentrated trading threshold.17 volume threshold established in Rule
(‘‘ATS’’) Transparency Initiative To
One commenter stated that by 11.2(b), and to continue to refrain from
Publish OTC Equity Volume Executed
providing the primary listing exchange trading such a security until the security Outside ATSs
with exclusivity in the quoting and satisfies the requirements of Rule
trading of thinly-traded securities, the 11.2(c). The proposals also make clear July 2, 2015.
proposals would allow the listing that the Exchanges will retain discretion Pursuant to Section 19(b)(1) of the
exchange to better innovate its market to quote and trade the affected Securities Exchange Act of 1934
structure for these securities, which securities. 23 In determining whether to (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
likely would lead to improved market exercise this discretion, the Exchanges
quality for the securities.18 At the same notice is hereby given that on June 23,
have represented that they will consider 2015, Financial Industry Regulatory
time, the commenter stated that that the such factors as member and investor Authority, Inc. (‘‘FINRA’’) filed with the
voluntary nature of the program should feedback, and whether other non-listing Securities and Exchange Commission
act as a check to assure that the listing exchanges have decided to cease (‘‘SEC’’ or ‘‘Commission’’) the proposed
exchange does not abuse its monopoly
quoting and trading the affected rule change as described in Items I, II,
position.19 The commenter noted,
securities. and III below, which Items have been
further, that the proposals are an
The Commission notes that each prepared by FINRA. The Commission is
incremental market structure
Exchange is required to notify its publishing this notice to solicit
adjustment, unlike other recent
members at least one trading day in comments on the proposed rule change
initiatives that the commenter
advance of any securities that it is from interested persons.
characterized as being larger in scope
and potentially disruptive.20 making unavailable for trading pursuant I. Self-Regulatory Organization’s
to Rule 11.2(b), and of any securities it Statement of the Terms of Substance of
IV. Discussion and Commission
Findings is making available for trading pursuant the Proposed Rule Change
to Rule 11.2(c).24 The Commission
After careful review, the Commission notes, further, that the Exchanges FINRA is proposing to expand
finds that the proposed rule changes, as believe that the proposals potentially FINRA’s alternative trading system
amended, are consistent with the Act could enhance the market quality of the (‘‘ATS’’) transparency initiative to
and the rules and regulations publish the remaining equity volume
affected securities, and that the
thereunder applicable to a national executed over-the-counter (‘‘OTC’’) by
commenters similarly supported the
securities exchange.21 In particular, the FINRA members, including, among
proposals as a step toward improving
Commission finds that the proposed other trading activity, non-ATS
rule changes, as amended, are consistent the market quality of less liquid
electronic trading systems and
with Section 6(b)(5) of the Act,22 which securities. internalized trades.
requires that the rules of the exchange V. Conclusion The text of the proposed rule change
be designed, among other things, to is available on FINRA’s Web site at
prevent fraudulent and manipulative It is therefore ordered, pursuant to http://www.finra.org, at the principal
acts and practices, to promote just and Section 19(b)(2) of the Act,25 that the office of FINRA and at the
equitable principles of trade, to remove proposed rule changes (File Nos. SR– Commission’s Public Reference Room.
impediments to and perfect the BATS–2015–37; SR–BYX–2015–25; SR–
EDGA–2015–19; and SR–EDGX–2015– II. Self-Regulatory Organization’s
15 KCG Letter at 1. 21), as amended, are approved. Statement of the Purpose of, and
16 See SIFMA Letter at 1–2.
Statutory Basis for, the Proposed Rule
17 See SIFMA Letter at 2; KCG Letter at 3. While For the Commission, by the Division of
Change
expressing support for the current proposals, one Trading and Markets, pursuant to delegated
commenter indicated that it would oppose any authority.26 In its filing with the Commission,
proposal to establish concentrated exchange trading
for actively traded stocks. The commenter also Robert W. Errett, FINRA included statements concerning
stated that the initiative to concentrate exchange Deputy Secretary. the purpose of and basis for the
trading must allow for the continuation of off-
[FR Doc. 2015–16727 Filed 7–8–15; 8:45 am] proposed rule change and discussed any
exchange trading of illiquid securities which, in the comments it received on the proposed
commenter’s view, provides important BILLING CODE 8011–01–P
supplementary benefits to exchange trading. See rule change. The text of these statements
may be examined at the places specified
srobinson on DSK5SPTVN1PROD with NOTICES
SIFMA Letter at 2.
18 See KCG Letter at 2. in Item IV below. FINRA has prepared
19 See id.
summaries, set forth in sections A, B,
20 See id.
and C below, of the most significant
21 In approving this proposed rule change, the
23 See Rule 11.2(c). aspects of such statements.
Commission notes that it has considered the
24 See Exchange Rule 11.2(d).
proposed rule’s impact on efficiency, competition,
25 15 U.S.C. 78s(b)(2).
and capital formation. See 15 U.S.C. 78c(f). 1 15 U.S.C. 78s(b)(1).
22 15 U.S.C. 78(b)(5). 26 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.
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![39468 Federal Register / Vol. 80, No. 131 / Thursday, July 9, 2015 / Notices
post all comments on the Commission’s ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 107C as it relates to DMM transactions,
Internet Web site (http://www.sec.gov/ notice is hereby given that, on June 26, and to make non-substantive changes to
rules/sro.shtml). Copies of the 2015, New York Stock Exchange LLC the Price List. The Exchange proposes to
submission, all subsequent (‘‘NYSE’’ or the ‘‘Exchange’’) filed with implement the fee change effective July
amendments, all written statements the Securities and Exchange 1, 2015.
with respect to the proposed rule Commission (the ‘‘Commission’’) the
Member Organization Non-Tier Adding
change that are filed with the proposed rule change as described in
Credit
Commission, and all written Items I, II, and III below, which Items
communications relating to the have been prepared by the self- Member organizations are currently
proposed rule change between the regulatory organization. The eligible for the Non-Tier Adding Credit
Commission and any person, other than Commission is publishing this notice to for all orders in securities priced $1.00
those that may be withheld from the solicit comments on the proposed rule or more, other than Midpoint Passive
public in accordance with the change from interested persons. Liquidity (‘‘MPL’’) 4 and Non-Display
provisions of 5 U.S.C. 552, will be Reserve orders, that add liquidity to the
I. Self-Regulatory Organization’s NYSE unless a higher credit applies.
available for Web site viewing and Statement of the Terms of Substance of
printing in the Commission’s Public The applicable rate for the Non-Tier
the Proposed Rule Change Adding Credit is $0.0015 per share. The
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official The Exchange proposes to amend its Exchange proposes to lower this credit
business days between the hours of price list to revise: (i) The non-tier to $0.0014 per share. The credits
10:00 a.m. and 3:00 p.m. Copies of such adding credit; (ii) certain fees for applicable to MPL orders and Non-
filing also will be available for executions at the close; (iii) credits Display Reserve orders would be
inspection and copying at the principal applicable to designated market makers; unchanged.
office of FINRA. All comments received (iv) credits applicable to supplemental
Executions at the Close
will be posted without change; the liquidity providers; and (v) pricing
related to the retail liquidity program The Exchange currently charges
Commission does not edit personal member organizations $0.00095 per
identifying information from under rule 107c as it relates to
designated market maker transactions, share for market-at-the-close (‘‘MOC’’)
submissions. You should submit only and limit-at-the-close (‘‘LOC’’) orders,
information that you wish to make and to make non-substantive changes to
the price list. The text of the proposed unless a member organization meets
available publicly. All submissions specified thresholds set forth in the
rule change is available on the
should refer to File Number SR–FINRA– Price List for MOC and LOC activity.
Exchange’s Web site at www.nyse.com,
2015–020 and should be submitted on The Exchange proposes to increase this
at the principal office of the Exchange,
or before July 30, 2015. fee by $0.00005 to $0.0010 per share
and at the Commission’s Public
For the Commission, by the Division of Reference Room. and to identify this pricing tier in the
Trading and Markets, pursuant to delegated Price List as Non-Tier MOC/LOC.
authority.31 II. Self-Regulatory Organization’s The Exchange currently charges
Robert W. Errett, Statement of the Purpose of, and $0.00065 per share for all MOC and LOC
Deputy Secretary. Statutory Basis for, the Proposed Rule orders from any member organization
Change executing (i) an ADV of MOC and LOC
[FR Doc. 2015–16729 Filed 7–8–15; 8:45 am]
BILLING CODE 8011–01–P In its filing with the Commission, the activity on the Exchange in the month
self-regulatory organization included of at least 0.375% of consolidated ADV
statements concerning the purpose of, (‘‘CADV’’) in NYSE-listed securities
SECURITIES AND EXCHANGE and basis for, the proposed rule change during the billing month (‘‘NYSE
COMMISSION and discussed any comments it received CADV’’); or (ii) an ADV of MOC and
on the proposed rule change. The text LOC activity on the Exchange in that
[Release No. 34–75353; File No. SR–NYSE– of those statements may be examined at month of at least 0.30% of NYSE CADV
2015–30] the places specified in Item IV below. plus an ADV of total close activity (i.e.,
The Exchange has prepared summaries, MOC and LOC and other executions at
Self-Regulatory Organizations; New set forth in sections A, B, and C below, the close) on the Exchange in that
York Stock Exchange LLC; Notice of of the most significant parts of such month of at least 0.475% of NYSE
Filing of Proposed Rule Change To statements. CADV. The Exchange proposes to
Amend Its Price List To Revise: (i) The A. Self-Regulatory Organization’s increase this fee to $0.00070 per share
Non-Tier Adding Credit; (ii) Certain Statement of the Purpose of, and the and to identify this pricing tier in the
Fees for Executions at the Close; (iii) Statutory Basis for, the Proposed Rule Price List as MOC/LOC Tier 2.
Credits Applicable to Designated Change The Exchange does not propose to
Market Makers; (iv) Credits Applicable change the fee of $0.0006 per share
to Supplemental Liquidity Providers; 1. Purpose applicable to MOC and LOC orders from
and (v) Pricing Related to the Retail The Exchange proposes to amend its any member organization executing an
Liquidity Program Under Rule 107C as Price List to revise (i) the Non-Tier ADV of MOC and LOC activity on the
it Relates to Designated Market Maker Adding Credit; (ii) certain fees for NYSE in that month of at least 0.575%
Transactions, and To Make Non- executions at the close; (iii) credits of NYSE CADV. The Exchange proposes
to identify this tier in the Price List as
srobinson on DSK5SPTVN1PROD with NOTICES
Substantive Changes to the Price List applicable to Designated Market Makers
(‘‘DMMs’’); (iv) credits applicable to MOC/LOC Tier 1.
July 2, 2015.
Supplemental Liquidity Providers
Pursuant to Section 19(b)(1) 1 of the (‘‘SLPs’’); and (v) pricing related to the 4 An MPL Order is an undisplayed limit order
Securities Exchange Act of 1934 (the that automatically executes at the mid-point of the
Retail Liquidity Program under Rule best protected bid (‘‘PBB’’) or best protected offer
(‘‘PBO’’), as such terms are defined in Regulation
31 17 CFR 200.30–3(a)(12). 2 15 U.S.C. 78a. NMS Rule 600(b)(57) (together, ‘‘PBBO’’). See Rule
1 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4. 13. See also 17 CFR 242.600(b)(57).
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Document Created: 2018-02-23 09:14:06
Document Modified: 2018-02-23 09:14:06
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 39463 |
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